Guide to Forming an LLC in North Carolina
Follow our free guide to form an LLC in North Carolina:
- Pros and Cons of Forming an LLC in North Carolina
- Starting Your North Carolina LLC
- Maintaining Your North Carolina LLC
- Additional North Carolina Resources
Check out our informative guide on building an LLC in North Carolina and learn everything you need to know about forming your LLC business.
Pros and Cons of Forming an LLC in North Carolina
Competitive Cost of Living
North Carolina’s cost of living, while not as low as Kentucky or Alabama, is still competitive versus the US average with a score of 95/100. Three of North Carolina’s major cities recently made the list of most affordable US cities, especially considered the lower cost of real estate — $175,000 versus the $200,000 US average.
Low Taxes for Businesses
The corporate tax rate in North Carolina is much lower than most states, which is currently at 3% and dropping to 2.5% beginning in 2019. Some businesses also pay a franchise tax of .15% — breaks down to $1.50 per $1,000 of taxable profits.
Privacy for LLC Members
North Carolina does not require all of the names of LLC members/manager to be included in the Articles of Organization. In fact, an organizer can submit the formation paperwork in place of the members.
High Cost of Industry-Specific Permits
Some permits cost higher than others. For example, the alcohol permits necessary for restaurants/hotels/clubs/banquet facilities in North Carolina are plentiful and expensive. Business owners are required to have separate permits to serve, beer, wine, and mixed beverages and the cost runs from $400 to $1,000 PER permit. For businesses who offer catered parties/dinners on company premises, the permits for having alcohol starts at $200 per permit.
High Fee for Annual Report
The annual report fee for LLCs in North Carolina is much higher than most states. The cost of the annual report is a shocking $200 per year.
Cost of Doing Business
- $125 Filing Fee / $200 Annual Report
Phase One: Starting Your North Carolina LLC
The process behind forming an LLC in North Carolina may seem daunting, but the steps for creating a business are not that difficult when you have help. The list below includes what you need to do to ensure that your North Carolina LLC comes together correctly:
- Step 1: Name your Business
- Step 2: Establish the Ownership of your LLC
- Step 3: Choose a Registered Agent
- Step 4: Register the Articles of Organization
- Step 5: Create your LLC Operating Agreement
- Step 6: File the paperwork for an EIN
Step 1: Name Your North Carolina LLC
The first step in forming your LLC in North Carolina is to choose a name your business. There are state and federal guidelines that cover the regulations and restrictions concerning business names.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
You also need to choose a domain name for your business’s website. Check availability at a number of online web services sites.
Step 2: Establish Ownership
The owners of an LLC are known as members and managers. All LLCs have members, but not every LLC has managers — the difference depends on the management structure of the business.
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
North Carolina LLC Member Guidelines
Required Number of Members
North Carolina LLCs must have at least one member or manager in order to form an LLC.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Articles of Organization on behalf of the LLC members.
North Carolina does not have an age requirement for LLC members. An organizer, however, must be at least 18 years old.
North Carolina does not impose any residency restrictions on LLC members
Step 3: Find a Registered Agent in North Carolina
The registered agent is necessary for all North Carolina LLCs. Your business is not considered official without filling this position.
What is a registered agent?
A registered agent can be either a person or business who is authorized to accept official mail and service of process notices for the LLC.
Why do you need a registered agent?
North Carolina law requires you to appoint a registered agent so that the state government has a consistent contact person for your LLC.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in North Carolina?
- A state resident with a physical address in North Carolina
- An LLC or corporation that is licensed to conduct business in North Carolina
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You are legally allowed to be your own registered agent as long as you have a physical address in North Carolina.
Is being my own registered agent discouraged?
LLC business owners risk compromising their personal information if they choose to be their own registered agent .
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in North Carolina. Find more information here.
Step 4: File the Articles of Organization
The most important step in setting up your North Carolina LLC is filing the Articles of Organization with the Secretary of State.
What is the Articles of Organization?
The Articles of Organization is a legally binding document that is filed with the state government to legally form your LLC.
Why do I need the Articles of Organization?
Your North Carolina LLC will not be legally recognized by the Secretary of State without filing this document. Consider this document as part of your LLC’s foundation.
What information is included in the Articles of Organization?
- The name of the LLC
- The location/address of the business
- The name and physical address of the registered agent
- The name(s) of the organizer filing the paperwork
- The statement of purpose
- The list of LLC officers (optional)
Additional North Carolina Filing Information — Professional LLCs
North Carolina also allows for people in the professional services industry to form a type of LLC known as a Professional Limited Liability Company (PLLC).
The following professions are allowed to form a PLLC:
- Physicians (general, surgeon, podiatrist, dentist, optometrist, chiropractor, physical therapist)
- Professional Counselors and Psychologists
- Architects and Engineers
- Social Workers
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Please Note: When filing the Articles of Organization, the certification from the business’s licensing board must be attached to the paperwork.
Step 5: Create an LLC Operating Agreement
While an Operating Agreement is not required to form an LLC in North Carolina, this document is still considered a vital necessity because it adds structure to your business and projects professionalism.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legal document that defines the rights and responsibilities of each person involved in the business and laying out the details involving how the business will operate.
Why do I need an LLC Operating Agreement?
Because the LLC Operating Agreement defines the roles of the business’s members and provides direction for daily operations, the document ensures stability and structure to the LLC and reduces future disputes.
Do I need to file the LLC Operating Agreement?
There is no need to file the Operating Agreement; the document is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
While there is not a set rule of what must be included in your LLC operating Agreement, most documents include the following the information:
- Listed members/managers and their roles
- Initial capital contributions of the members
- Distribution of profits
- Voting percentages and regulations
- Member transfer/addition rules and restrictions
Get a customized LLC Operating Agreement for your small business with Swyft Filings. Find more information here.
Step 6: Obtain an EIN
What is an EIN?
The EIN is a nine-digit number assigned to your business by the Internal Revenue Service (IRS). The EIN identifies your business with the government like a personal Social Security number.
What does EIN stand for?
EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.
What business entities need an EIN?
The types of business entities that need an EIN include:
- An LLC with employees (even if owned by one person)
- An LLC with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is the only business entity that is not required to have an EIN.
Why is an EIN necessary?
The more common reasons you would need an EIN are:
- To open a U.S. bank account
- To file your company’s taxes
- To hire employees
- To pay independent contractors
If you have a business entity and collect revenue of any kind, you will need an EIN.
Swyft Filings offers EIN services for small businesses in North Carolina. Find more information here.
Phase Two: Maintaining Your North Carolina LLC
The initial steps that you have already completed for your LLC in North Carolina formed your business with the state; you can now move to the next phase to get your business ready to move forward. The next few steps are:
- Step 1: Register for Taxes in North Carolina
- Step 2: Obtain any Needed Permits and Licenses
- Step 3: File the Annual Report for your LLC
- Step 4: Request a Certificate of Good Standing
Step 1: Register for North Carolina State Taxes
Unlike many states, North Carolina does not require LLCs to pay a corporate or franchise tax. LLC members are still required to pay state and federal income taxes on their earnings.
State Income Taxes
The state income tax for North Carolina is currently 5.499%, but will drop to 5.25& in 2019.
Corporate Tax Information
An LLC can opt to be taxed as a corporation — for that, the business will be responsible for paying a corporate and franchise tax on earnings. The corporate tax rate in North Carolina is currently 3% but will drop to 2.5% in 2019.
The franchise tax is a little different and breaks down to $1.50 per $1,000 of whichever option nets the most taxes:
- Total company stocks, surplus, and undivided profits
- 55% of the appraised value of all real property in North Carolina
- actual investment amount in the real property in North Carolina.
The minimum amount a company will pay in franchise tax is $200.
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 4.75%
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in North Carolina can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File an Annual Report
All businesses formed in North Carolina are required to file an annual report with the Secretary of State.
What is an annual report?
An annual report is a legal form that keeps your business’s information current with the Secretary of State; the report must be filed with the state on a periodic basis.
What kind of information is in the annual report?
The information requested in the annual report is similar to what is in the Annual Report:
- The name and address of the business
- The name and address of the registered agent
- The names of the members
- The business’s EIN
Is the annual report part of public record?
The annual report filed on behalf of your LLC is a matter of public record.
Fees and Due Date
Due Date: April 15th
Implications of Late Filings: Dissolution of the LLC after 60 days delinquent
Swyft Filings helps you stay compliant by providing stress-free solutions. File your annual report with us today.
Step 4: Obtain a Certificate of Good Standing
The main steps for starting your North Carolina LLC have been completed, but you still need one more thing — a Certificate of Good Standing.
What is a Certificate of Good Standing?
The Certificate of Good Standing is official confirmation from the state that your business is properly formed and is in compliance with all state regulations.
Who issues the Certificate of Good Standing?
The Certificate of Good Standing is generally issued by the Secretary of State.
When can I request a Certificate of Good Standing for my business?
You can request a Certificate of Good Standing through the Secretary of State after your LLC is officially formed.
Why do I need a Certificate of Good Standing?
Many businesses and financial institutions want proof that your LLC is in good standing with the state government.
Additionally, some states require a Certificate of Good Standing before a business can apply for Foreign Qualification.
Does the Certificate of Good Standing have an expiration date?
The Certificate of Good Standing does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Good Standing for your North Carolina LLC. Click here for more information.